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Clearing and Settlement Mechanisms

Clearing and Settlement Mechanisms (CSMs) are the processes underlying all payment transactions exchanged between two payment service providers (PSPs).

Clearing and Settlement Mechanisms

They are invisible to the end-users of the payment schemes, yet they are indispensable in transferring money from one account to another when two different are involved.

participating in the schemes have to choose a CSM in order to comply with the reachability requirements of the schemes.

Clearing and settlement, a central piece of the payment puzzle

To understand clearing and settlement mechanisms, imagine John, who wishes to transfer money from his account to another person, Anna. This example would also work for any kind of user – a business, a public body, and so on. The two people can either be located in the same country or in two different countries, and in our example they hold payment accounts with different . If John holds sufficient funds in his account, the money is moved to Anna’s account. Behind the scenes, John’s , which we will call ‘ A’ sends a message to a ‘clearing’ system (a company specialising in this activity) asking to move this money to Anna’s , ‘ B’. This clearing company aggregates all orders for transactions to other received from A during a given number of hours, as well as orders for transactions received from its other customers (like B) and intended for other , including A.

The clearing company is then able to ‘net’ the orders: in our simple example, the gross amount of transfers towards B is compared to the amount of transfers towards A (this is the ‘netting’). The net amount of money to be moved from one of the to the other (the final position) is then transferred. This last step is the ‘settlement’ of the transaction: it is now complete, and discharges the obligation of the with a net debit position towards the with a net credit position.

In other words, clearing is defined by the European Central Bank as “the process of transmitting, reconciling and, in some cases, confirming transfer orders prior to settlement, potentially including the netting of orders and the establishment of final positions for settlement.” The settlement is “the completion of a transaction or of processing with the aim of discharging participants’ obligations through the transfer of funds.”

Clearing and settlement in the SEPA schemes context

Services based on the payment schemes and offered by CSM companies are governed by market forces and lie outside the scope of the . There is a clear separation between the as the scheme manager and CSM organisations. Each CSM organisation can propose its own solution, provided that it is compliant with the rules stated in the schemes.

Each participating in the schemes freely works with the CSMs of its choice. What matters is that the is reachable.

As soon as a signals its readiness to participate in the scheme(s), it is obliged to be reachable if it is to receive transactions. This reachability can be achieved by using one or several of the following options:

  • An Automated Clearing House (ACH) that is compliant with a scheme or schemes. An ACH is a multilateral arrangement based on legislation or private contractual arrangements with multiple memberships, common rules and standardised procedures. The transactions are cleared and settled among the members of the ACH.
  • A decentralised bi- or multilateral clearing and settlement arrangement (i.e. not via an ACH) that is compliant with a scheme or schemes. A clears and settles its transactions with another directly in an agreed bilateral channel or through third parties (these parties act as correspondent banks).
  • An intra- and / or intra-group clearing and settlement arrangement that is compliant with a scheme or schemes. In this case, the two are branches or subsidiaries within a single entity or within a group of . They use their respective accounts within that entity or group to clear and settle transactions.
CSM organisations compliant with the EPC SEPA schemes

Any CSM organisation can publicly announce its compliance with an scheme by filing this disclosure letter.

The list below includes all CSM organisations compliant with one or several schemes:

 
 

Overseen by

scheme

scheme

scheme

Inst scheme

Banca d'Italia  

Banca d'Italia

check check check Check

BI-COMP and, as from 30/11/2018, through TIPS

 

Banco de España

Banco de España

      check

As from 30/11/2018 (through TIPS)

Banco de Portugal

Banco de Portugal

      check

As from 30/11/2018 (through TIPS)

Bank of Greece

Bank of Greece

 

    check

As from 01/06/2019 (through TIPS)

Bank of Lithuania

Bank of Lithuania

      check

As from 30/11/2018 (through TIPS)

Banka Slovenije

Banka Slovenije

      check

As from 30/11/2018 (through TIPS)

Bankart

Bank of Slovenia

check check check  

Banque centrale du Luxembourg

Banque centrale du Luxembourg

      check

As from 30/11/2018 (through TIPS)

Banque de France

Banque de France

      check

As from 30/11/2018 (through TIPS)

Banque nationale de Belgique/Nationale Bank van België

Banque nationale de Belgique/Nationale Bank van België

      check

As from 30/11/2018 (through TIPS)

Borica - Bankservice JSC  

Bulgarian National Bank

check check check  

CEC-UCV  

National Bank of Belgium

check check check

 

check

As from 18/11/2018

Central Bank of Cyprus

Central Bank of Cyprus

      check

As from 31/12/2019 (through TIPS)

Central Bank of Ireland

Central Bank of Ireland

      check

As from 30/11/2018 (through TIPS)

Central Bank of Malta

Central Bank of Malta

      check

As from 30/11/2018 (through TIPS)

CENTROlink

Lietuvos Bankas

check check   check

De Nederlandsche Bank

De Nederlandsche Bank

      check

As from 30/11/2018 (through TIPS)

Deutsche Bundesbank

Deutsche Bundesbank

check check check check

As from 30/11/2018 (through TIPS)

DIAS  

Bank of Greece

check check check  

EBA CLEARING  

European Central Bank

check check check check

 

EquensWorldline  

De Nederlandsche Bank

check check check check

 

Eesti Pank

Eesti Pank

      check

As from 19/11/2018 (through TIPS)

Eurogiro  

  check check check  

FINA 

Hrvatska Narodna Banka

check      

GSA  

Österreichische Nationalbank

check check check  

Iberpay  

Banco de Espana

check check check check

 

KIR  

Narodowy Bank Polski

check

 

 

 

Latvijas Banka  

Latvijas Banka

check     check

As from 30/11/2018 (through TIPS)

Narodna Banka Slovenska  

Narodna Banka Slovenska

check check check check

As from 30/11/2018 (through TIPS)

Nets A/S  

Finanstilsynet

check check check check

 

Nexi Payments S.p.A.

Banca d'Italia

Check Check Check Check

Oesterreichische Nationalbank

Oesterreichische Nationalbank

check check check check

As from 30/11/2018 (through TIPS)

SIA  

Banca d'Italia

check check check  

SIBS FPS  

Banco de Portugal

check check check check

 

STET  

Banque de France

check check check check

 

Suomen Pankki

Suomen Pankki

      check

As from 30/11/2018 (through TIPS)

TRANSFOND  

Banca Nationala a Romaniei

check      

 

Companies offering messaging services compliant with the schemes

Likewise, any company wishing to disclose its intent to offer messaging services to CSMs that support full compliance with the schemes can file this disclosure letter.

The chart below shows which companies have informed the of their ability to offer such messaging service:

 

 

Overseen by

For the Credit Transfer scheme

For the Direct Debit Core scheme

For the Direct Debit B2B scheme

For the Instant Credit Transfer scheme

SIA  

Banca d'Italia

check check check check

S.W.I.F.T. SCRL  

Central banks of the Group of Ten countries (G-10)

check check check

As from the 4th quarter of 2018